Peter I understand in concept but clearly not sure how someone qualifies for the particular rank versus another.

Here in the US, we really don't have an equivalent honor (honour). Perhaps "Hall of Fames" (music, baseball, etc.) or maybe your hands and feet in cement in LA, or a "star" (which is maintained by the honoree - currently 25K). Or Kennedy Center Honor.

Gela's AC Motto: "All Roads Used to Lead to BC's - Now They Lead to Hurricane's!"

I haven't checked, but I'm sure Wikipedia must list these British honours and give the hierarchy. Many are given for timeserving in various positions and their value must be viewed in that light. My own father had one that he never ever used because he recognised that was all it was. Many people decline them for the same reason, but then of course the record never shows that they were even offered. The MBE (Member of the British Empire) is pretty low - junior clerks in government service can get this at the end of their "careers" - was awarded to each of the four Beatles quite early on in their careers, but later as a political protest they handed them back. Apparently there was a lot of consideration before many years later Paul McCartney was awarded his knighthood. I see from Wikipedia that he is also listed as being an MBE, so I imagine he had to re-accept that as a condition of the knighthood.

Next up is OBE (Order of the British Empire) and is also given out free for time serving. Of course, some people do get these two awards (and other lower ones, like the BEM) on merit rather than timeserving, so it's hard to tell what it means.

The next is CBE (Commander of the British Empire), and this isn't often given for timeserving. I'm sure Robert Plant got it to a large extent because Prince Charles has always liked him personally and is a fan of LZ.

I lose track of all the awards - you can see them in Wikipedia - but all the way up to knighthood and beyond (peerages) they can be gained by timeserving. There are several types of knighthood though, and some of them are real honours that you can't get by timeserving.

All of the lower orders, some of the knighthoods and most of the peerages are effectively political rewards, technically awarded by the Queen as Head of State but actually decided upon by the Prime Minister (for the higher ones) and his advisors (for the lower ones. But there are certain orders, some of which give someone a handle to their name (knighthoods and peerages) and others which don't (eg. OM - Order of Merit) are fully awarded by the monarch and have great value and significance.

No. A "sir" has a knighthood, much higher than CBE. A "lord" is higher still. It used to be that anyone entitled "Lord" could sit in the upper house of Parliament, but many peerages are hereditary and the present government decided these people shouldn't be allowed to do that. New "life peers", which is what we're talking about, do have the right (and the duty) to attend the House of Lords. In fact, that's the principal reason for appointing them, to have more people on your side that the other lot has.

The really high honours, the ones earned only on merit, don't give you any handle to your name. You're still just plain Mr etc, but you do have the right to put some letters after your name.

It's all rather fatuous, but it stems directly from the feudal system introduced from France to Britain in 1066 that we still have today (as we still have a monarchy).